Musk tempers news of Mexico factory
Global interest rates tap brakes as Tesla’s net income slumped
Tesla Inc. CEO Elon Musk said the Austin-based EV maker is slowing its plans to build a new factory in northern Mexico.
In a call with reporters and analysts Wednesday evening, Musk cited worries about the global economy and interest rates for potential delays on the project outside the city of Monterrey.
“In Mexico, we’re laying the groundwork to begin construction and do the long lead items, but I think we want to just get a sense for what the global economy is like before we go full tilt,” Musk said on the call after the company reported its thirdquarter earnings. “I am worried about the high interest rate environment that we’re in.”
Tesla’s slower approach to the Mexico factory came along with cautious optimism about Cybertruck, the company’s futuristic pickup that’s being built at Gigafactory Texas outside Austin.
Calling it “our best product ever,” Musk said customer deliveries are expected to begin Nov. 30 — but that Tesla is still struggling with production.
“There will be enormous challenges in reaching volume production with the Cybertruck, and then in making the Cybertruck cash-flow positive,” he said. “This is simply normal when you got a product with a lot of new technology.”
Late-november deliveries would represent a multiyear delay from the original timeline. Musk first showed a prototype of the wedge-shaped pickup in November 2019 and said production would start in 2021. Earlier this year, he said the company would deliver its first Cybertruck from Austin in the justcompleted July-to-september quarter.
The updates came after Tesla reported that income slumped in the third quarter. Sales grew as the company slashed vehicle prices, but profits took a hit.
After markets closed Wed
nesday, the maker of electric vehicles, solar panels and batteries reported net income of $1.85 billion for the recent quarter, down 44% from the same period a year earlier. Earnings per share fell year over year to 53 cents from 95 cents.
Total revenue rose 9% to $23.35 billion, missing analyst’s forecasts of $24.19 billion.
Earlier this month, the company reported that it sold 435,059 vehicles in the third quarter, up 27% from the same stretch last year. Even so, Tesla’s deliveries missed the mark of 461,000 vehicles that analysts had predicted, according to Factset Research. It was down from 466,140 vehicle deliveries during the April-to-june second quarter, a decline Tesla blamed on planned downtime to upgrade its factories.
In Austin, Tesla has been installing equipment for assembly lines and body shops for Cybertruck and other projects.
Tesla has been slashing prices most of this year to keep attracting buyers who now have a wider selection of electric vehicles as more automakers shift from gasoline-powered cars and trucks and as interest rates make payments higher. The discounts range from $4,400 on Tesla’s top-selling vehicles to as much as $20,000 on its most expensive models.
The latest round of cost cutting trimmed Tesla’s operating margin, which represents how efficiently sales are turned into pretax profits, down to 7.6% in the third quarter. That was down from 17.2% a year earlier. The measure also declined sharply in the first two quarters of this year.
In addition to lower EV sale prices, increased expenses related to Tesla’s Cybertruck and development of an Ai-trained “humanoid robot” also hurt the company’s bottom line.
As usual, Tesla’s third-quarter sales consisted primarily of its Model 3 and Model Y vehicles, which have been made even more attractive by lowered prices. Despite large price cuts, sales of the aging models S and X fell 14% year over year to
15,985.
Looking ahead, the company reiterated its plans to produce about 1.8 million vehicles this year.
Shares of Tesla’s stock were trading at $220.11 as of market close on Thursday, down 9.3% from the prior day’s close.